Will Hindenburg’s latest accusation have wider implications for India? | Wilnesh News

This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse and the big players behind its meteoric rise. Like what you see? You can subscribe here.

No one is questioning India’s sovereignty as the world’s largest democracy marks 77 years of independence from British colonial rule today.

However, some investors this week have been questioning the independence of India’s market regulator in discharging its regulatory responsibilities, a topic more appropriate for this newsletter.

Securities and Exchange Board of India (SEBI), equivalent to the U.S. Securities and Exchange Commission, Short-seller Hindenburg Research is the subject of this week’s latest attack. The US-based hedge fund, which bet against Adani Group Inc in early 2023, has now accused SEBI chief Madhabi Puri Buch of having a financial interest in a party that his agency is investigating.

The short-seller said Buch and her husband held shares in an offshore fund in which large sums were invested by associates of Vinod Adani, brother of Adani Group Chairman Gautam Adani . Buch Dismissing the report’s insinuations as baseless But it did confirm that her husband owned shares in the fund.

What’s unusual in this case is that Hindenburg – a short-seller that makes money when stocks fall – is attacking market regulators rather than specific stocks.

But, it’s true.

Adani Group initially lost more than $13 billion in market value on Monday, the first day of trading since the weekend allegations were made. By the end of the day, the group’s market loss was $2.4 billion, or 1.2%, while Nifty 50 index Closed flat.

There are wider potential impacts as well.

Together, adani port and Adani Enterprises Accounting for just under 2% of the Nifty 50 benchmark, this means they can drive the overall index and influence broader investor sentiment.

This means Hindenburg’s allegations pose problems for India’s wider investor community as it affects the country’s reputation for regulatory fairness and stability. All of this comes as India seeks to contrast itself with China, whose rule-makers and enforcers have been criticized in recent years for making somewhat arbitrary decisions.

Shumita Deveshwar, chief India economist at TS Lombard, said: “At a time when foreign inflows are volatile and concerns about overvaluation of Indian equities are rising, if these allegations raise questions about institutional credibility, concerns that these accusations could have harmful effects.

“The most important priority for the authorities, whether it is the current SEBI chairman or the central government, should be to ensure that the image of the stock market regulator as an independent and credible institution is maintained.”

Deveshwar added that one way to improve the image is through “auditing that is perceived to be fair.” The economist also noted that as long as SEBI as an agency continues to protect small investors, as it recently warned of a bubble, “the impact of the allegations will be limited”.

Others also argue that a market regulator is more than just an individual. Rajeev Agrawal, a US hedge fund manager and managing partner of DoorDarshi India Fund, said the allegations against his principal “should not have much impact on its valuation as the SEBI process is institutionalized and aligned with It has nothing to do with specific people.”

However, investors should not forget that India is an emerging market and therefore has some inherent risks, said Mohit Kumar, chief financial economist at Jefferies Group.

Kumar said despite the accusations against key market regulators, Jefferies remains “structurally bullish” on India because the country “has a good demographics and growth story.”

“We will have some situations where there are concerns about individual companies, but I don’t think that will impact our medium-term bullish view on India,” he added.

Indian electric vehicle startup Ola Electric has launched its initial public offering, valuing it at US$4.8 billion. Shares in the SoftBank-backed e-scooter maker rise 45% higher than the initial price. The company launched its first product only about two and a half years ago. By 2030, electric two-wheelers are expected to account for 60% to 70% of all new scooter sales in India. Two-wheelers are the most popular form of transportation in the country.

Prime Minister Narendra Modi has outlined India’s goals for hosting the 2036 Olympics. CNBC-TV18 reported that Modi said on Thursday that the country was sparing no effort to Hosting the Olympic Games in 2036. Like India, several other countries including Saudi Arabia, Qatar and Turkey have also positioned themselves as strong contenders to host the sporting event. The International Olympic Committee (IOC) is not expected to decide on the host city until elections next year.

Indian stocks have lost momentum this week. this nifty 50 The index closed at 24,143.75 points, down nearly 1% this week. The index has gained 11.10% this year.